It's early, but Revolve Group (RVLV -1.87%) is already emerging as one of the biggest winners in the pandemic recovery. The company smashed analyst estimates in its first-quarter earnings report, and could do it again when it reports second-quarter earnings on Aug. 4.
In this Fool Live segment, Fool.com contributor Jeremy Bowman explains why the company has a lot going for it in the economic reopening.
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Jeremy Bowman: I want to talk about Revolve Group. This is an e-commerce fashion company. They tend to sell at a higher-end price point, around $150-$200 items. I'm really excited about the stock as a reopening play. They use influencer-driven marketing and live events and they tend to sell occasion wear like dresses. You think of weddings, music festival, those social gatherings. The pandemic was difficult for them like a lot of apparel companies, but just based on the pent-up demand for these reopening activities, I think they're doing pretty well. They're going to post a strong quarter.
First-quarter revenue was up 22% and the EBITDA was up more than 300%. This is also a pretty profitable company. Their gross margin was 54% last year, which is pretty great for a retailer and that gives them a lot of money to invest in marketing and building the brand. They also have a mix of owned brands and sell other emerging and established brands, which I like. Last quarter, 26% sales came from owned brands. Those tend to be higher-margin and it gives them more control of their products and branding.
If you want to get a sense of the company, their biggest event is Revolve festival, which is held concurrently with Coachella most years. So you think of the Instagram, Gen Z, millennial, Coachella vibe, that's really what they're tapping into and with influencers as well. I think that's a smart move for long-term growth and it's done well so far. Looking to Q2, management didn't give any guidance, but it did say that April sales growth was ahead of the first quarter. That might be partly affected by the lockdown comparisons a year ago. But I'm expecting a strong quarter either way. I also give management credit for managing the challenges during the pandemic well. Seventy seven percent of sales last year came at full price. Even though revenue fell three percent last year, they still increased EBITDA by 25 percent, so they're able to squeeze more profit even during a rough year. Then I think long term, we just talked about Stitch Fix. I think there's a lot of opportunity in apparel e-commerce. It's still a small share of the overall apparel retail and this is a huge industry. Overall, I think we've got a great recovery story here. The company has strong long-term growth prospects, high margins, and management team that's proven it's mettle last year.
